Thursday, February 21, 2008

Book Review: "The Millionaire Next Door" by Stanley & Danko

Do you want to accumulate wealth? Then read this book.

Doctors Stanley and Danko do a great job analyzing "why" some people are able to accumulate wealth. And although I already knew or suspected some of these points, here are several which are great nuggets gleaned from their book:

  • What I call the "offense vs. defense" illustration: Some people do a great job of maximizing their income; they play "good offense." Other people do a great job of minimizing their expenses; they play "good defense." Those who accumulate wealth typically do a great job at both of these. There are many who make over $100,000/year who also spend it all; there are many who make less than $50,000/year and manage to save and invest what they have for a comfortable retirement.
  • It is quite easy for the children of the affluent to not mimic their parents' wealth accumulation skills. Accustomed to wealth in the family, they can easily become prey to the temptations to spend and exhibit wealth—while ignoring the parental lessons of saving, thrift, and hard work.
  • Many millionaires drive "regular" cars and trucks, buy their clothes at Penney's, and live in average homes. Much of the reason they are millionaires is because they do this! The majority of those who buy fancy vehicles, homes, etc. are merely putting up a facade of wealth and may not have much true "wealth" at all.
  • Those who are wealthy typically spend much more time than the average person researching and studying investment opportunities...which is why their investments tend to do better.
  • If you want your children to accumulate wealth, there are certain practices you should ingrain into their formative minds, and several others you should stedfastly avoid.
Although the book was written in 1996 (ISBN 0-671-01520-6) and its statistics are consequently a bit "aged," the principles learned in this book make it a must-read for anyone who really wishes to accumulate more wealth than they have now. Those who enjoy statistics (me, for example) will find the book an easy read; those who find them tedious may want to skim over them and look for the nuggets of wisdom the book contains.

No comments: